Crisis hits refinery sector in Europe

European refineries are facing closures due to poor demand, a result of slow growth and the euro crisis, according to an oil professional. Meanwhile Turkey and the Middle East are seeking ways to increase their production capacities

The ongoing European economic crisis has paved the way for a significant decline in oil products in debt-hit European countries. Turkey is likely to attract more investments both in refinery and storage facilities as European plants close, the executive of a global energy company said.

“Many refineries will close in Europe due to a slow in demand for oil products,” said Mark Lewis, managing director of London FACTS Global Energy Group. The slowdown in European economic growth is causing a decline in demand in oil products and if the trend continues, eastern countries -- including Turkey -- are likely to divert the route of the oil products from west to the east.

The timing, location and pace of future refinery closures will have an important impact on European storage requirements, Lewis said. “Turkey may soon play a crucial role in regional oil and gas supply.”

Turkey has just agreed invest $5 billion with Azerbaijan in a joint refinery development project in the western province of İzmir. The deal was settled in October and the refinery is scheduled to commence operations in 2015, with the capacity to process 10 million metric tons of crude oil. On June. 28, Kuwait approved a $14.5 billion refinery construction capable of producing 615,000 barrels per day while earlier this year Saudi Arabia has also announced it will complete the 400,000 barrels per day capacity refinery in Yanbu city with a Chinese partner.

Meanwhile back in January, Shell announced plans to close its German Harburg refinery and convert it into a storage site after failing to find a buyer, while United States oil major ConocoPhillips is considering either selling its Wilhelmshaven refinery or turning it into a terminal, according to Reuters.

This year France has shut both its 105,000 barrel per day Berre refinery owned by Lyondell Basell Industries, and the Total Dunkirk Refinery, due to a collapse in demand. A number of refineries in Germany, Sweden, the U.K., Italy and Romania have either closed down or have recently gone up for sale.

This is good news for Turkey, Lewis said. “We can see the growing economy and rising demand in Turkey in oil products,” citing “rising demand, increased crude supply and growth in oil products trade in Turkey,” as reasons for a potential increase in investments. Expanding storage opportunities will “increase the importance of the country,” he said.

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